Putting lipstick on a pig makes the animal no less a pig. Cladding the lobby in marble and installing fancy fixtures makes an old building no younger. Converting old buildings, especially high rise buildings, to condominiums raises unique due diligence, developer-transition, construction defect, financing and litigation issues. Although the refinished lobby may look great there is much more there than meets the eye.
What due diligence process has the converting developer/sponsor gone through in acquiring the building? Has the unit owner-controlled board obtained the developer/sponsor’s due diligence documentation? Was there/is there a fuel storage tank on the property? Was there/is there asbestos on the property? Was there/is there lead paint on the property?
What about the water supply – where does it come from? Is there a water tank on the property? Is the water supply plumbing system serviceable? What about sanitary plumbing? What about airshafts and other conduit? Has the elevator been maintained, renovated or replaced? What about the fire suppression and fire/smoke alarm systems? How old is the roof? What is the roof made of?
What’s under that fancy new façade and how long will the fancy new façade last? Is there a parking deck? Does the parking deck comport with what was described in the public offering statement? Is the building subject to other contracts – billboards, cell phone towers, laundry rooms? What are their terms? Who gets the money? Has there been any “pre-payment” to the developer/sponsor?
How old are the windows? Who owns the windows? If the unit owners own the windows, is the Association being stuck with a water infiltration problem anyway? How old is the HVAC equipment? Are there detailed maintenance records? How old is the boiler system? What about the electrical system?
Is the Association inheriting a staff such as maintenance employees, managers, black seal building engineers etc.? Do any of these employees live on site? Are there employee leases in place? Are there employment agreements in place? Are the employees unionized? Are the staff members adequately experienced and trained? Are they loyal to the association rather than the developer?
The questions go on and on. The point is that, although purchasers may be dazzled by cosmetic enhancements, unit-owner board members must not be. Especially in the condominium conversion context, the unit-owner board members must hire the right professionals to evaluate the Associations position from the physical to the financial to the personnel standpoints. We assist unit owner board members in forming the professional teams necessary to evaluate the Association’s position and, where necessary, we litigate on behalf of Associations to compel the developer/sponsor to make things right.